The Effect of Oil Price on Exchange Rate Movement: Evidence from Oil-Importing Countries
Post by MSF Chula at Monday, 18 September 2017 09:51 AM

Most empirical literatures investigate the relationship between oil price and exchange rate
movement on the oil exporting countries. It is possible that the results may not be applied
with oil importing countries. Hence, this paper aims to investigate the dynamic long-run
relationship between oil price and exchange rate in 7 oil importing countries in Asia market.
Our empirical results support previous studies that there is long-run relationship between oil
price and exchange rate. The result shows positive relationship between oil price and
exchange rate. In addition, Granger causality suggests that oil price provide fundamental
factor to explain exchange rate movement. Lastly, this paper examines the effect of oil price
shock on exchange rate movement by using Impulse response function. The result suggests
that the response of exchange rate to oil price varies across countries in oil importing
countries.
The results have important implication on the monetary, fiscal, inflationary, trade policies
and investors for these countries and other countries with similar characteristic.

Last updated at Monday, 18 September 2017 09:51 AM